DRM: An Industry Changed

Imagine you are a successful company, and you've enjoyed nearly half a century of mutually beneficial business with your best client. Fortunately, he has been a reliable and nearly endless consumer of your product, and he seems to need you as much as you need him. So imagine your surprise when one day, quite suddenly, this customer pulls out a gun, shoots you square in the face, takes your wallet and then blames you for the entire incident.

The year is 2000. You are the music industry, and the gun is Napster.

The reality of the events surrounding Napster's monumental popularity and significance at the end of the last millennium is far more complex than a simple gunshot, and certainly both sides of the debate continue to fight a battle not set to be resolved for years or decades. But, the result of Napster's two-year siege of the music industry is as strongly felt now in the relationship between consumers and the industries that provide digital media as it was six years ago.

Let's put the impact of Napster in perspective. In February of 2001 Napster recorded its highest simultaneous users logged in, 26.4 million people. According to Media Metrix, in that month alone, the service provided 6.3 billion usage minutes to users worldwide; 11,000 years of downloading, and what many call theft, compressed into the shortest month of the year.

In a very real sense, record executives woke one morning to find that millions of customers quite suddenly had access to their entire libraries for free. In a matter of days, the recording industry was relying on a revenue stream based on the honor system. Piracy had, of course, been an issue prior to Shawn Fanning's release of Napster, but it had been relegated to the tech-elite and had been perceived as unsavory as walking into your local Tower Records and shoving a stolen CD down your pants. Once millions of people made the choice to log into Napster, most with the express intent of downloading copyrighted music, it was clear consumers had widely changed the way they perceived their relationship with music ownership, and they had done so in a sudden and violent revolution.

Although the industry eventually managed to shut down Napster, it could not put the genie back in the bottle. Peer-to-peer developed and adapted to the best possible legal pursuits by decentralizing and exploring new technologies.

And the frenzy to download has not been abated. While the media no longer has the face of Shawn Fanning to put in front of its cameras, the public continues to push the boundaries of digital ownership. One of the most popular sites for finding Bit Torrents of movies, television and music ranks among the top 200 websites in the world and hosts more traffic than Match.com, Netflix, Slashdot or the online sites for Target, Wal-Mart or Best Buy. And with distributed peer-to-peer clients such as Bit Torrent, it has become far more difficult for media companies to simply litigate and shut down the offenders.

So, can we be surprised that digital rights management exists, that protecting digital property is of greater significance to companies than improving the consumer experience, that the industries that can be affected by piracy have lost as much faith in their customers as we customers have in their business practices? Whether intentionally or not, Shawn Fanning's Napster was Fort Sumter, and the media industries were understandably shocked to find that the army massed against them numbered in the millions.

The full extent of piracy's effect on any industry including music, movies and video games, is truly an unknown quantity. One nationally released study by Harvard and North Carolina universities in 2002 suggested file-swapping had an effect on the industry indistinguishable from zero. The following year another study for the National Bureau of Economic Research refuted those conclusions and suggested that each album downloaded represented one-fifth of a lost sale. The RIAA claims that piracy accounts for $300 million in lost sales each year. The Entertainment Software Association goes much further, suggesting that $3 billion in sales are lost due to piracy.

While consumers continue to request less stringent DRM and more freedom for interoperability of their digital media, the music, movie and game industries are understandably skeptical of the reliability of consumers to respect the legal rights of copyright owners. It's not entirely unlike the skepticism a judge might show someone facing his fifth DUI offense who claims he's off the juice for real this time. In fact, considering the continued popularity of peer-to-peer programs, assume that the man standing before the judge is holding an open bottle of whiskey.

While Steve Jobs strongly encouraged the recording industry to eliminate DRM this past Tuesday, the reality is the industry is far more likely to focus its efforts on creating some kind of DRM that can be put on applied to unprotected music rather than loosening the restrictions it puts on the now billion-dollar online music industry. DRM is the price we as consumers pay for forcing the industry to lurch forward into the digital age, by throwing a brick through the window and looting the store during the riot. The same is true of the copy protection we gamers have long suffered.

We as consumers have created the necessity of a service like iTunes, which has sold now more than 2 billion songs, as well as the necessity for the digital rights management. Napster both signified the desire in the average consumer for digital distribution, while at the same time signifying that the average consumer will take advantage of easily exploitable media. It was our litmus test that validated the concerns a wary videogame industry had been espousing for a decade. Inconvenient as it may be, the rules of fair use are being rewritten, and the actions of tens of millions of consumers in 2000 handed all the cards over to the media industries. We have only ourselves to blame.